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The Belgians will not waffle
Commentary: Sorry St. Louis, a takeover of Anheuser-Busch is certain
By David Weidner, MarketWatch
Last Update: 12:01 AM ET Jun 17, 2008
ST. LOUIS (MarketWatch) -- Sure, that's what the city is called, but the formal name is "Anheuser-Busch, St. Louis, Missouri," the advertising tag line of America's greatest brewing company and the town where I'm from.
Anheuser-Busch Cos., along with the civic pride of St. Louis, is about to be sold to some conglomerate in Belgium that no one has heard of. The buyer, InBev , was formed by the merger of AmBev and Interbrew. They make Stella Artois, Bass and something called Hoegaarden.
Hoegaarden? Sounds like a beer to drink after pruning the hedges. Probably has an earthy flavor.
The Busch family has only itself to blame for this abomination. There have been too many years of neglecting shareholders, failing to grow through acquisitions. It is an eat-or-be-eaten world, and Anheuser-Busch BUD is now lunch.
There's no one here who likes this deal. That's no surprise. But there doesn't seem to be anyone who likes it in New York, a place where economic concerns always seem to outweigh pride, emotion and the sentimental.
Sell the Chrysler Building to Abu Dhabi? Sell the company I work for to some Australians? Big deal. Sell the maker of Budweiser to some Belgians who watch soccer and call it football? This is a national tragedy.
The imminent sale of Anheuser-Busch also represents a crossroads in my life. As young man, I watched the brewery-owned St. Louis Cardinals play baseball while sampling the company's core products, as part of my rite of passage in the Gateway to the West. Covering the financial markets, the dealmaking and the people behind it have marked my most recent years.
The possibility that someday these two worlds would become intertwined was always in the back of my mind. But the brewery always seemed to be on top. Besides, the Busch family would be the buyer in any deal. Companies like Yahoo Inc. YHOO and even A.G. Edwards WB were Johnny-come-latelies and commodities that were born to be sold. Busch was 156 years old.
'Going to hurt'
I wasn't alone in my misgivings. Justin Brown, who works at Big Daddy's Bar a block from the brewery, said that this deal was akin to Harley-Davidson falling into foreign hands. Except, he added, the sale of A-B would be far worse.
Big Daddy's is a brick, corner bar built early in the last century, in the heyday of St. Louis when it hosted the World's Fair and Olympic Games; the Cardinals were in the World Series nine times in 20 years. Today, it's mostly a bar, but offers lunch to the white-collar crowd from the brewery. You can't avoid the thick smell of hops and barley from down the street.
In business, bigger companies buy smaller ones.
In no small way, the brewery is a holdover from the city's glory days. Since then, the city's population has declined. McDonnell Douglas, Southwestern Bell and TWA have moved or been sold. InBev is threatening to take the last of the region's major corporate headquarters -- really, the one responsible for the city's identity -- away.
"Short-term, the stock price is going to go up and it's going to be great," Brown said. "But there's a lot of people who drink Budweiser because it's an American beer. If it's not owned by an American company, in the long run that's really going to hurt it [the brand]."
Were people angry at InBev or Anheuser-Busch's management? There's still too much disbelief, according to Brown.
"People are spooked," he said. "Everyone's kind of like, 'Is this going to happen?' and we're waiting for the shoe to drop."
A bigger tradition
The other shoe came Wednesday in the form of a bid worth $65 a share, valuing the brewer at $47.5 billion, or $56.6 billion including debt. The offer is about a 35% premium to Anheuser-Busch's stock price during the last six months.
Since then, the A-B board has been quiet, refusing to meet with InBev. Warren Buffett's name has been kicked around (he's one of the largest shareholders), but no one seems to know if he wants the deal or wants to block it.
August Busch, A-B's chief executive, has opened talks with Mexico's Grupo Modelo GPMCY as a way to block the InBev takeover. Though the Modelo talks could slow InBev or force a higher bid, it's unlikely to scuttle the Belgian offer. See full story.
Anheuser-Busch's days as an independent company are numbered. In business, bigger companies buy smaller ones. They offer premiums and they cut costs. The buyers try to assuage civic feelings by promising that they will keep jobs and continue investing in the community. Sometimes, they keep their word; sometimes they don't.
Ultimately, it's the shareholders who decide these takeover battles, and Busch shareholders have only been able to get a 35% premium after drinking a lot of the company's product and dreaming. The board may want independence, but a two-birds-in-a-Busch argument is unlikely to fly.
Though it may not feel like it, Anheuser-Busch is just a business. It brews beer and then sells it. A-B may be the biggest U.S. brewery, but it's not the only one. If people really do put down their Budweisers because it's made by Belgians, then someone else will find a way to make an American beer.
So it may not feel right, but we will get over it. We got over Daimler AG's DAI takeover of Chrysler in 1998 and Sony Corp.'s SNE acquisition of Columbia Pictures in 1989. How do people in foreign countries feel when U.S. firms buy companies that are part of a national identity? They get over it.
The reality is that we value free markets and the unfettered flow of capital and efficiency more than local pride. We have to -- otherwise we'd end up like French industry in the 1980s.
Deep down, St. Louis recognizes this. David Nicklaus, a columnist for the Post-Dispatch newspaper, began his most recent Sunday column with "Get a grip, St. Louis. It's only a business deal."
OK. Does that mean we don't need to rename the city?
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